How to Raise Your Credit Score And Get a Better Interest Rate on Your Mortgage
Your credit score can have an impact on the rate of interest that you’re offered the next time you apply for a mortgage. People with high credit scores are often given lower interest rates. Here are some tips that will help you to improve your credit score over time.
Use a Credit Card Responsibly to Raise Your Credit Score
Credit cards get a bad rap, but if you are strategic with how you use them, they can become an asset in raising your credit score.
First, be sure to only use a small proportion of your available balance each month – don’t max out your card! Maxing out your available credit can lower your credit score, whereas demonstrating self-control by only using a small portion of your available credit (30% or less) each month can raise your score.
Second, be sure to actually use your credit card every month. You don’t have to go hog-wild with a major shopping spree (in fact, I recommend that you don’t… see the point above about using only a small portion of your available credit limit each month). But even charging a very small amount to the card on a monthly basis, and taking care to pay it off in full each month, can help to improve your score.
Demonstrating that you are a responsible user of credit cards is a great way of showing lenders that you are a low credit risk, can raise your credit score, and help you to get a better interest rate on your mortgage.
Pay Your Bills on Time, Every Time
Another factor that goes into your score is whether or not you have a history of paying your bills on time. 35% of your FICO score is based on your payment history and your previous 2 years worth of payments are weighted the most heavily. So keep in mind that even if you’ve made mistakes in the past, as long as you start to do everything right from here on out, the impact of those past mistakes will lessen over time.
Reduce Your Total Debt to Raise Your Credit Score
If you know that you’re going to be applying for a mortgage soon, try to reduce your debt from other sources. Do whatever you can to pay down your car loans, student loans, and credit card debts. Showing lenders that you pay down your debts over time can lead to an increase in your credit score, which can be rewarded with a lower interest rate when it’s time to get that mortgage!
Raise Your Credit Score and Save on Interest Rates
Aside from the lowered stress you’ll feel by making a habit of using credit responsibly, you’ll enjoy the money you save on interest rates the next time you apply for a mortgage. Take a look at your credit situation today, and do everything you can to improve it. Little changes can add up over time, and it’s never too late to start!